Why you will skim this article

Most likely, you’re going to read this sentence and hit the back button.

Still here?

Good, then you’re likely to scan through a few paragraphs in this article and then give up. (Unless, you’re a long-time reader and trust that my writing is worthy of your time. More on this later)

Why are humans so impatient on the web?

Back in the early 1990s, when the web was getting started, websites looked like this.

Today, the same website looks like this.

What happened?

The answer to the question of why the web is increasingly becoming more visual and less text-heavy will also shed light on how we decide what to spend time on, a question that creators and entrepreneurs need to be obsessed with. ...  Read the entire post →

Can an economy keep on growing?

1/ Imagine an economy that keeps on growing indefinitely. It’s essentially a non-zero-sum economy – as the pie becomes bigger, everyone becomes better as even a small percentage of a really large number is substantial.

World GDP over the last two millennia

2/ A capitalistic economy is a fantastic invention – entrepreneurs compete to give consumers more value cheaply. Markets create incentives for innovation, and innovation helps the world become richer as over time more and more human desires are satisfied.

3/ Economic wealth as measured by GDP is nothing but products and services available for purchase. Capitalism suggests these things will be up for purchase because people want them and we can make it. Hence, GDP approximates the total useful stuff available for humans. ...  Read the entire post →

How to get rich by investing your savings

I’ve recently relooked at my personal portfolio and realized I have a thing or two to say about investments. So here it goes:

1/ For goodness’s sake, do NOT keep your money lying in a savings account or do a fixed deposit (FD).

We generally inherit this financial laziness from parents. You can do better than them, no?

2/ Realise that you are actively *burning* money in FDs / savings account.

If you incorporate inflation and tax on interest income, your corpus is likely getting smaller every passing day.

3/ What if I told you that a couple of hours invested in pushing some buttons online can give you 13x the returns that you get from FDs...  Read the entire post →

The Reverse Turing Test and proof-of-human currency

Are you a bot? No, seriously how can you prove that you are not. How can you prove that you are not some sort of algorithm crawling YouTube videos trying to make sense of this world? And how can you prove that I am not a bot, that I am not one of those Google’s AI?

This question may seem funny, but I find it one of the most important one facing our generation. Actually, the question is less about whether you are a bot or not, it’s more about how can you prove that you are human.

If you prefer watching a video instead of reading, I’ve narrated the entire essay in the following 8 minute video.

This question’s importance is due to the fact that with increased automation, humanity faces the grave danger of going jobless. This has already started to happen in many industries: right from replacing drivers that make up a significant majority of any working population to doctors, lawyers, and artists. Automation is increasingly taking over all the jobs that traditionally humans used to do and the economic implications of this automation is that more and more wealth is getting concentrated in fewer and fewer hands. The rise of Google, Apple, FB can be directly attributed to tech’s recent dominance, which is now accelerating at a very fast pace, concentrating wealth in the hands of a few shareholders.

One solution for the jobless world is the universal basic income (UBI) ...  Read the entire post →

Your company’s org chart is more important than you think

Startup founders have many biases. Some are classic cognitive biases that impact decision making, while others are specific biases that impact their product thinking.

There’s yet another founder bias whose impact is not felt for a long time. It occurs when founders assume employees think and act like them. The often repeated advice that “early startup employees wear multiple hats” is an implication of this bias. I remember I assumed that just because I was able to do multiple things (coding, design, marketing, etc.) I expected our sales folks to make their own presentations and engineers to think of new product features.

It was a bad idea.

Wearing multiple hats is dangerous

Founders are all about breadth. Early in a company’s history, when the team size is just 2 or 3 people, everyone has to do multiple things. However, as the company expands and new people come onboard, the hangover of everyone doing multiple things remains. The first marketer does everything: from AdWords to writing blogs to web analytics to developing brand guidelines. Similarly, the first salesperson is expected to find leads, qualify people’s interest, setup meetings, give demos, negotiate, write RFPs and then try converting interested prospects into customers.

New employees who’re asked to do multiple things settle into these broad roles and give some level of performance. However, this performance is mediocre and a source of frustration early on, when either you’re not growing or you’re growing, but there’s chaos and confusion all around.

This is a terrible way to grow as a company

A founder has to realize that her org chart determines the limits on her company’s growth. People give an amazing performance when they’re given one well-defined thing to do. In a company’s early days when the hiring budget is limited, I understand that the temptation to hire for generalists is ever present. But generalists don’t give you growth (they’re great at experimentation though). Real growth kickstarts when specialists are brought on to do killer execution on things that your company can benefit most from.

Org chart should implement your strategy

Right from the start, the CEO/founder should constantly be thinking about the organization design that’s required today and may be required one year after. Nobody else would do this. No employee will come and say fire me, hire a specialist instead. A CEO/founder only has few jobs to do, and one of them is company strategy and by implication, designing the company’s org chart.

I define organization design as:

What roles should be there in the company and how those roles should be related to each other.

From my experience, many entrepreneurs and CEOs (blindly) follow industry norms in hiring and so their organization chart takes a standard shape that’s indistinguishable from their competitors. That’s inefficient because each company has an essentially unique strategy and hence deserves a unique organization design that implements that strategy effectively.

In some cases, org design happens by accident because there’s no well-thought growth strategy (“we will do better than competitors” isn’t a strategy, but this is a topic for another post). A prerequisite for doing org design is clarity on strategy because if there’s no clarity, whatever org you have will automatically start determining what your strategy.

Common mistakes in organization design

To be a good organization designer, you have to be a good psychologist. You have to first learn what conditions bring out stellar performances in individuals and then design a structure where people can find themselves in such conditions. Effective org design is difficult because the temptation to underinvest and the fear of bloated org always exists.

(I’ve learned a lot on org design from this blog)

Common mistakes:

  • Underinvesting in specialist roles. I heard someone say that you don’t realize how much better a job can be done until you’ve seen someone do it 10x better. This means that for every role in your company, there are people who can do parts or entirety of it 10x better than existing people. You don’t need a good marketer, what you need is someone who’s killer at AdWords when it comes to your industry. You don’t need a frontend engineer, what you need is frontend performance engineer who can speed up your app 10x and hence considerably impact user satisfaction. If there’s a job worth doing well (from the perspective of your strategy), hire a specialist.
  • Having quality functions report into quantity functions. Functions such as QA and development should always be parallel in org chart and not report to one another. If you report quality oriented functions into quantity oriented ones, quality will suffer. If you report quantity into quality, speed will suffer.
  • Having long-term initiatives report into people accountable for short term. Doing this is the reason why big organizations usually cannot innovate when it comes to completely new initiatives. For people who’re tasked with short-term targets, long-term initiatives are a distraction because at the start they’re simply too small or too risky to get meaningful attention or resources. Since they’re measured on short-term targets, the big and the scaled up is where their interest goes. This lack of early nurturing causes long-term initiatives to fail early, creating a vicious cycle of stagnation. To solve this, long-term initiatives (such as strategy, R&D lab or brand building) need to be put into a separate place in the org chart (perhaps under a leader who reports directly to the CEO).
  • Not eliminating outdated roles and functions fast enough. The org chart should change as the strategy of the organization changes, which happens automatically as the company grows. Org chart implements the strategy, so not changing it frequently means your company will keep attempting to grow via the old ways (which may not work because market shifts constantly). So one of the jobs of the CEO and the board is to frequently assess if the org chart is aligned to strategy. This is why there are about a gazzilion books on change management because people don’t like their roles to be redefined or getting a new boss or, in the worst case, their job being replaced or made redundant.
  • Promoting high performers to be managers and leaders. Super-hard to avoid in reality, but when individual contributors who’re high performers are promoted, the organization gets damaged twice: one, the person who does the specialist job really well isn’t there to perform it, second, you have a manager who is probably a mediocre one (when you could have gotten an experienced manager). If you promote your best performers to managers, ultimately your org will be full of mediocre managers. Too often org charts revolve around the availability of people (and the fear of losing high performers). The right way, however, is to be clear of what roles exist in the org chart and what types of people will perform those roles best. Don’t fit roles into people, fit people into roles.
  •  ...  Read the entire post →

    Notes from Founders mentor Founders [SaaS edition] – April 2018

    On 13th April 2018, I hosted a panel discussion with Varun Shoor, founder of Kayako and Pallav Nadhani, founder of FusionCharts. It was an experiment to see whether a many-to-many discussion between SaaS founders turns out to be useful for early stage startups.

    To ask questions to the SaaS founders panel, I had received 19 applications, out of which 5 were selected. The call was not recorded so that the founders could talk frankly. Here are some generic notes and insights from the one hour call. (We all realized that one hour for five founders isn’t really sufficient.)

    Questions were categorized in three broad areas.

    • Product Roadmap
    • Demand generation – top of the funnel, Partnerships and Gotomarket
    • Focus – what to focus on

    Major insights in each category are as follows. (I’ve attributed Varun and Pallav to the best of my memory – we didn’t record the conversation).

    Product Roadmap

    1/ Just because you have the technology, you shouldn’t attack multiple markets. For example, the same technology – sending emails – has made many different multi-million dollar companies that focus on specific niches.

    2/ Serving everyone is not the answer at an early stage. You need to have depth in a particular industry before you go broad.


    Entrepreneurs generally underestimate the size of a niche ...  Read the entire post →

    Copying ideas is highly underrated

    No man’s an island and, as a corollary, no startup is truly unique. Media oversells us the virtue of breakthrough ideas. Journalists are paid to highlighting what’s new and noteworthy. Imagine the number of clicks an article would get if it was titled: ‘Here’s the nth example of a Chinese firm copying what’s working in the west’.

    To catch our attention, publications run stories that celebrate innovations.

    Wright brothers got the fame, but someone else made all the money

    The invention of the airplane was definitely a breakthrough moment for humanity and the Wright brothers deserve all the fame they got. But economically they didn’t do as well as Boeings and Airbuses of the world. Wright brothers knew it themselves that they’re never going to make money from what they were doing. In a conversation with their biographer, Orville Wright said:

    “If we had been interested in invention with the idea of profit, we most assuredly would have tried something in which the chances for success were brighter. You see, we did not expect in the beginning to go beyond gliding”

    Startup success is like solving a multi variable equation

    There’s nothing inherently bad with pursuing truly innovative ideas. What’s bad is pursuing that path with the intent of making money. (There’s a reason why librarians make money than scientists). If you’re a tinkerer or an explorer, go ahead and innovate to your heart’s glee. But if you’re a startup founder, you’re in the business of making money and being innovative might work against your objectives.

    Visualize startups solving a multi variable equation and the solution to this equation is a fast growing business.

    Startups profit seeking missiles in a multidimensional landscape

    In the model above, I’ve condensed many factors into a few variables but in reality there’s so much more that has to go right for a startup that it shouldn’t be surprising that most startups fail. For a startup to succeed, metaphorical stars have to align perfectly.

    And more variables you tweak, the more likely that you’ll fail in solving the entire equation. This is because all these variables are dependent on each other. Startup success is like a jigsaw puzzle where one missing piece spoils the joy and two or more missing pieces is a horror.

    The problem with innovation and what copying solves

    When you’re innovating, you’re juggling with most of the balls up in the air. If you were one the Wright brothers, your problem space is somewhat known: people really do want to travel. But everything else is unknown. You have no idea of product’s efficacy (will people fear being up in the air?), you have no idea about unit economics (can we make it profitable?), you have no idea of distribution channels (how to profitably reach to customers who most need air travel?), you have no idea of competitive advantage (what benefits should we focus on to compete with cars and railways?).

    It doesn’t matter whether you get most of the answers right, because if there’s one answer wrong, you may burn all your funding or patience before seeing any commercial success

    So, why not simply copy instead? Tell me.

    Copying is wonderful because it gives you evidence and clues for a solution to the startup multi variable equation exists. It allows you to let other entrepreneurs make mistakes in solving the equation and save you time and effort.

    I’m not alone in my observation that copying rocks. Check out this graphic from the HBR article: imitation is more valuable than innovation.

    via this HBR article

    I recommend reading the original article but the gist is in this line: “Today’s lions are the descendants of copycats.”

    Successful copycats are smart

    When I started VWO, it wasn’t the first web A/B testing tool (Google Website Optimizer was, VWO’s differentiation was in making A/B testing easy). Then, when I started PushCrew, it wasn’t the first web push notifications tool (OneSignal and Roost were there in the market, PushCrew’s differentiation was focus on midmarket). In contrast, whenever I tried innovating, coming up with breakthrough products they failed (read through postmortems of our ‘innovative’ products here and here).

    We all know iPhone wasn’t the first smart phone, neither was Google the first search engine, nor Facebook the first social network.

    Of course, you know that being first in the market means little if you’re in the wrong market (you knew that right?). But what’s important to note is what copying alone doesn’t guarantee success. There are smart copycats and then there are dumb ones (tip: you want to be the former).

    Smart copycats know the value of timing in the market. As a market evolves, you want to enter into it early when it’s nascent and growing. Enter the search market today by copying Google, and you’re going to be crushed. This lesson was learned by Cuil that raised $33m in 2008 to compete in search market and failed miserably. As Peter Thiel says, be the last the monopolize the market. I’ll add my caveat: also don’t be the first to innovate.

    When you’re copying, you can’t do surface level copying – you have to commit yourself to understand why a new and emerging category is growing like wildfire and what you can do to beat existing players in your discovered market. Having a strong differentiation over existing players is important, but my fear is that differentiation is a highly misunderstood word. Just because Google differentiated from AltaVista through their PageRank algorithm, it doesn’t mean that differentiation can only happen via technology In Facebook’s case, differentiation was done by limiting signups to the Harvard campus only.

    Similarly, you can differentiate by taking the same idea and tweaking one variable in the startup success equation. Perhaps explore the same idea in a slightly different market, or introduce it at a different price point, or reach the growing market via a new distribution channel. Instagram’s copying of Snapchat stories is a perfect example of successful copying. They copied a feature that teens on Snapchat loved and exposed it to their audience (many of whom had never used it before). Bringing a great feature to millions of users is indeed creating new positive value in the world. We entrepreneurs see the act as copying, users see it as their life becoming better.

    On the subject of copying, Instagram’s VP of product said: “this is how the tech industry works”. If a billion dollar company is shameless about copying, why you – my dear entrepreneur – are hell bent on innovating?

    To make how to copy clearer, let me quote Prof. Oded Shenker from the HBR article that I linked above.

    Good imitators don’t wait; they actively search for ideas worth copying. And they often look far from their industry or home country. They also don’t just copy an idea, they come up with a cheaper or better—increasingly it’s cheaper and better—mousetrap. They disrupt the innovator, whose costs are higher by a third, on average, and who’s still sinking investments into the innovation while the imitators are building an offering based on the market reaction to it.

    Don’t be afraid of copying, you can’t copy perfectly anyway ...  Read the entire post →

    Mathematicians and startup founders

    Throughout history, mathematicians and physicists, like entrepreneurs, have craved for a theory of everything. They’ve been looking for a set of principles that can predict and explain all phenomena that we observe. In case of mathematics, this search led to mathematicians Bertrand Russel and Alferd Whitehead write a three volume (thick book) Principia Mathematica. Among other results in the book, they dedicated several hundred pages to derive 1+1=2 from even more basic “self-evident truths” (called axioms).

    In the footsteps of Bertrand and Alferd, another famous mathematician David Hilbert in 1920s set out to derive all of mathematics from as few axioms as possible. The aim of Hilbert’s program was to formalize all of mathematics so that any given mathematical statement could be proven true or false using only initial axioms. A related expectation from this program was that if such axioms are found, then doing mathematics would be equivalent of mechanically combining these axioms. In other words, Hilbert wanted to transform mathematics from a creative enterprise to a mechanistic one.

    Then Gödel dropped a bomb on this project in 1931.

    His incompleteness theorems shook the foundation of mathematics. What Gödel essentially did was to formalize this silly little sentence (“This statement is false”) into mathematics and ask whether it was true.

    Since we’re talking about mathematics here, it’s easy to get the details wrong so I’m going to quote someone else on this topic to explain incompleteness theorem.

    if we have a list of axioms which we can enumerate with a computer, and these axioms are sufficient to develop the basic laws of arithmetics, then our list of axioms cannot be both consistent and complete.

    In other words, if our axioms are consistent then in every model of the axioms there is a statement which is true but not provable.

    The proof of incompleteness theorem is very interesting and I encourage you to go through it. However, what I find more interesting is what it implies.

    Incompleteness means that all systems of basic principles are insufficient to enumerate all true statements that can come out of it ...  Read the entire post →

    Reliably detecting humans on the Internet

    1/ There’s ONE big unsolved problem for anyone who’s interested: detecting humans on the Internet.

    It has potential to unlock billions of dollars of value. Here’s how.

    2/ Today, some of the biggest tech companies (Google, Facebook, Twitter) make billions of dollars by monetising human attention.

    Digital ad industry is total of $280Bn.

    3/ The reason Facebook, Google make this amount of money is because their algorithms for detecting bots are closed source.

    There’s a continual arms race between click-farms / bot-makers and bot detecting algorithms at these companies.

    4/ Even then the problem of fake clicks in digital is massive. P&G recently pulled out of FB

    Many other companies are following the suit.

    5/ In the offline world, the cost of viewing an advertisement is high. To claim higher TV advertising rates, a TV channel will have to purchase millions of TVs, keep them ON and then somehow convince advertisers that those are genuine watchers.

    6/ In the digital world, since ad viewing is happening on the Internet: it’s hard to convince whether at the other end, there’s a person who watched an ad or a bot.

    7/ This problem worsens significantly in the blockchain world. Imagine that your bot-detecting code is open source, it’ll be trivial to beat it and claim advertising money.

    8/ Reliably detecting human attention seems one of the positives going for centralised, closed source systems like FB/Google.

    9/ Users will not prefer to pay for content directly as they’ve been used to free content, so advertisers are an important party in our digital economy.

    10/ I’m not sure how this can get solved. An obvious answer is captchas but they get broken constantly (and isn’t a great user interface).

    11/ Anyone who is able to detect humans reliably on the Internet will create billions of dollars worth of value in our economy.

    Any takers? Your opinion?

    Businesses get killed by non-competitors

    Entrepreneurs worry about competition all the time. And they’re correct in doing so. I think the “focus on customers, ignore competition” is a terrible business advice. Customers will never ask you to introduce switching costs, yet that’s precisely what businesses should do in order to be profitable for a non-trivial amount of time.

    In my last article, I wrote about how an entrepreneur should go about creating a legal monopoly via network effects and economic moats. In this article, I’ll talk about how even legal monopolies get killed.

    What kills them is not direct competitors (after all, they’re monopolies). They usually get killed as a collateral damage while someone else is doing their thing.

    Vectors of competition

    Entrepreneurs usually dislike direct competition. Colgate competes with Pepsodent. Coca-Cola competes with Pepsi. Mac competes with Windows. You compete with that-company-with-bad-products-and-worse-customer-service. You get the drift.

    However, if you ask customers about what alternatives they have for your products, they’ll amaze you with their responses. For VWO, our competition isn’t so much other A/B testing products, but deciding via opinions or gut feeling.

    Customers care about their life, needs, family, happiness, and progress. Using your products is definitely not on their life’s bucket list. In fact, using products or technology is an extra effort for them. The best radio is not a radio – it’s simply a room full of sound waves.

    When customers abandon legal monopolies, they usually do not switch to direct competitors. They’ll switch to things that allow them to live their life as they want – with or without products from either you or your competitors. Say, for example, if you sell best radios in town, your customers will likely switch to Apple Music and not other radios.

    So, if you are the number 1 product in the market, your customers are switching to products that you never even considered as a competition. You laughed at them as toys, until it was too late.

    There are numerous examples of competition coming from a totally unanticipated vector and unintentionally destroying a legal monopoly:

    • Linux vs Windows. Who would have thought that a student trying to learn OS fundamentals will take away billions of dollars from Microsoft in the server market?
    • Wikipedia vs Britannica. Who would have thought a group of unpaid volunteers can create world’s largest and most comprehensive encyclopedia?
    • Altavista vs Google. Who would have thought that one simple algorithm by two grad students will disrupt an established market leader?
    • Match sticks vs Mobile phone. I know someone who is in the business of supplying chemicals to the matchstick industry. He says his industry is dying because people in small towns aren’t buying matchsticks for cigarettes because their smoking breaks have been replaced by watching videos on phones! Mobile phone companies certainly did not mean to kill the match stick industry

    Of course, as per the news yesterday, the #1 payments platform in India (Paytm) is feeling threatened when the #1 communications app in India (WhatsApp) integrated payments. Who would have thought that competition for a payments platform will come from a messaging app?

    So remember: starting a business is hard, growing it is harder and

    keeping it alive ...  Read the entire post →